Choose a tax service
When setting up your taxes for the United States, you can choose the tax service that works best for your business. You can select Shopify Tax, Basic Tax, or Manual Tax to calculate and collect taxes from your customers at checkout. You can change which tax service you use at any time.
Starting January 15, 2023, only Shopify Tax will be updated with new features. The Basic Tax and Manual Tax services will continue to work and receive tax rate updates, but they won't receive new features.
Review the following table to determine which tax service is best for your needs.
|Shopify Tax||Basic Tax||Manual Tax|
|Sales tax calculation|
|Automatic rate calculations using tax registrations||✔||✔||✘|
|Automatic rate calculations using product categories||✔||✘||✘|
|Automatic recommendations for product category||✔||✘||✘|
|Support for state fees||✔||✘||✘|
|Reporting and insights|
|Tax liability insights||✔||✘||✘|
|Advanced reports (coming 2023)||✔||✘||✘|
|Exemptions and overrides|
|B2B tax exemptions||✔||✔||✘|
|Customer tax exemptions||✔||✔||✘|
|Manual tax rate overrides||✔||✔||✔|
|Collecting tax in states with no state sales tax||✘||✘||✔|
Choose your tax service
After you review the features and considerations for each tax service, you can choose the service that you want to use.
- From the Shopify admin, go to Settings > Taxes and duties.
- Click United States.
- Click Manage tax service.
- Select the tax service that you want to use, and then click Save.
If you select Basic Tax as your tax service, then your store will continue to use Shopify Tax for free until January 15, 2023. After January 15, 2023 your store will automatically switch to Basic Tax, or remain on Shopify Tax depending on which tax service you choose.
Registration-based tax collection
Taxes are automatically collected for states where you have a registered tax liability.
Rate calculation using product categories
Tax exemptions and modifications are calculated automatically based on the category of the product.
Automatic recommendations for product categories
Product categories are automatically suggested for your products.
Rooftop accuracy means that taxes are calculated precisely according to street address, rather than being limited to zip codes. This feature is included in only Shopify Tax.
Support for state fees
Some states collect tax-like fees. For example, in Colorado, orders containing taxable goods that are delivered by a motor vehicle in Colorado are subject to a $0.27 non-refundable retail delivery fee. This feature is included only in Shopify Tax.
Special tax rates that apply on specific dates are automatically calculated. For example, Texas has a sales tax holiday from August 5-7 each year. This feature is included in only Shopify Tax.
Only Basic Tax or Shopify Tax support Markets Pro. You can't use Manual tax with Markets Pro.
Enables you to access reports that show the amount of taxes you've collected.
Automatic suggestions and insights on your potential tax liabilities are provided based on where you ship and sell to.
Advanced tax reports have additional details about the amount of tax you collect, and can be used to help you file with tax authorities.
B2B tax exemptions
Enables you to sell licensed products that are tax-exempt.
Customer tax exemptions
Enables you to designate that specific customers are tax-exempt.
Product and shipping tax overrides
Assign product tax overrides or shipping tax overrides to apply specific tax rates that override any other tax calculations for selected products or shipping destinations. Overrides can only be applied at the state level for Manual Tax.
Collecting tax in states with no state sales tax
Enables you to collect tax in states that have no overall tax rate. For example, if you're in New Hampshire and you sell food that's prepared and consumed on-site, then you might need to apply a 9% tax rate.